Uniform Business Rate (Hansard, 22 November 1990)

HL Deb 22 November 1990 vol 523 cc773-4 773

§ 3.6 p.m.

§ Lord Monson asked Her Majesty's Government:

§ Whether, in view of the 64 per cent. increase in company liquidations in the third quarter of this year and the sharp decline in business confidence reported by the Confederation of British Industry, they will consider (a) limiting the increase in the uniform business rate next year to 5 per cent. and (b) extending transitional business rate relief to new lettings as well as existing ones.

§ Baroness Blatch
My Lords, the answer is no. The cost of limiting the increase in the uniform business rate in 1991–92 to 5 per cent. for businesses would create a deficit in local authority funding which would require local authorities to reduce their spending or to levy it on the community charge payer; or the deficit would have to be met by the national taxpayer. As regards the second part of the Question, we have no plans for extending transitional relief to new lettings.

§ Lord Monson
My Lords, I thank the noble Baroness for her reply, disappointing though it is. I half expected that some fresh thinking might have been applied to the subject. However, does she agree that it would make far more sense to cap business rates, thereby helping businesses specifically, especially small businesses, than, for example, to lower interest rates prematurely, which would only set off the appalling house price spiral once again to the great detriment of first-time buyers and to the economy generally?
Will the noble Baroness also agree that refusal to extend transitional relief to new lettings prevents the effective allocation of resources? Surely that must be a primary aim of government.

§ Baroness Blatch
My Lords, it is very important to make a distinction between transitional arrangements and the system as it will operate after transitional relief. The effectiveness of the reforms means that business and commerce rates will be capped; they will be capped to the level of inflation. Therefore, no rate increase will ever be greater than the rate of inflation. The only power which exists in legislation is a power to reduce the rate and not to increase it. That compares, under the old system, with rate increases over the past year or so of anything between 33 per cent. and 57 per cent. I believe that when the new reforms are in place they will prove to be much fairer to business and commerce.

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§ Baroness Sharples
My Lords, can my noble friend say whether small businesses have been more successful in these difficult times than large businesses?

§ Baroness Blatch
My Lords, I am more than pleased to give the figures in that respect. The year 1989 was the most successful one ever. There was a net increase of 87,000 new businesses. That figure takes into account the new businesses which came into the system and the liquidations that went out of it.

§ Lord McIntosh of Haringey
My Lords, the Minister has told the House that the increase in the uniform business rate will be in line with inflation. Can she now tell us why the figure for inflation for the UBR is so much higher than the figure for inflation allowed in local authority expenditure?

§ Baroness Blatch
My Lords, the increase in the figure for local authorities is indeed in line with the rate of inflation. The noble Lord has actually taken into account one aspect of provision for local authorities. The increase in their spending is in line with inflation. The increase in respect of local businesses—namely, 10.9 per cent.—is a publicly published figure and that is the figure which has been applied when assessing the rate.

§ Lord McIntosh of Haringey
My Lords, I am sorry but that answer is still not clear. Is the Minister saying that the standard spending assessments for local authorities are being increased by 10.9 per cent., in line with the inflationary increase in the unified business rate? If not, what is the figure? If the figure is different, why is there a difference?

§ Baroness Blatch
My Lords, I am saying that the SSAs for local authorities are well beyond 10.9 per cent. I believe that the average for most classes of authority is in excess of 16 per cent.

§ Lord Monson
My Lords, is the Minister aware that current valuations of business premises are based on the semi-boom conditions that prevailed in the spring of 1988, when interest rates were exceptionally low and business confidence was high? Are not those valuations unrealistically high in view of the slump that prevails today?

§ Baroness Blatch
My Lords, the noble Lord makes an important point. No one suggests that these times are easy for business, but that only strengthens the Government's objective, which is to get inflation down. If we can do anything for local businesses, especially small businesses, it would be to reduce the level of inflation. If we remit the costs to businesses now, that cost would only have to be levied on other people.